The state Department of Insurance is investigating allegations that more than 200 bar and restaurant owners in California bought bogus insurance policies purportedly backed by Lloyd's of London.
The U.S. attorney's office in New York and the U.S. Postal Inspection Service also are looking into complaints that wholesalers sold phony Lloyd's policies, a source close to those investigations said.
Last month, Lloyd's began sending out letters to businesses in California warning them that "we do not believe that underwriters at Lloyd's have underwritten this insurance."
The apparent fraud is the largest "in a long time involving Lloyd's," said Dean Hansell, U.S. general counsel for Lloyd's Corp.
Earlier this week two bar owners filed a civil suit in Superior Court in Santa Barbara against eight defendants alleging breach of contract and negligence over insurance policies they bought.
The insurance was purchased through various agents, including Whilt, Fatch & Perry in Santa Barbara, which was acquired this year by Brown & Brown Inc. The two companies are named as defendants in the civil suit.
"We acted in good faith to place coverage for our customers," said Susan Rodriguez, executive vice president at Brown & Brown. "We are as concerned about this situation as our clients are."
The agents said they purchased the policies through wholesalers, including United Restaurant Insurance Services Inc. and California Restaurant Specialty Cooperative Inc.
The policies were issued through a Canadian firm, Heritage Agency/Surplus Lines, and its operator, Ian Stewart, which purportedly was authorized by Lloyd's. Neither could be reached for comment.
United Restaurant officials saw documentation confirming Stewart's authority to issue the policies, said United's lawyer, Michael McDonnell. "The genuineness of that confirmation is being checked out by us."
A spokeswoman for the state Department of Insurance said she could not comment on an investigation.